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CUR > SEC Filings for CUR > Form 10-Q on 8-Nov-2016All Recent SEC Filings

Show all filings for NEURALSTEM, INC.

Form 10-Q for NEURALSTEM, INC.


Quarterly Report


Statements in this Quarterly Report that are not strictly historical are forward-looking statements and include statements about products in development, results and analyses of pre-clinical studies, clinical trials and studies, research and development expenses, cash expenditures, and alliances and partnerships, among other matters. You can identify these forward-looking statements because they involve our expectations, intentions, beliefs, plans, projections, anticipations, or other characterizations of future events or circumstances. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements as a result of any number of factors. These factors include, but are not limited to, risks relating to our ability to conduct and obtain successful results from ongoing clinical trials, commercialize our technology, obtain regulatory approval for our product candidates, contract with third parties to adequately test and manufacture our proposed therapeutic products, protect our intellectual property rights and obtain additional financing to continue our development efforts. Some of these factors are more fully discussed, as are other factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC, as well as in the section of this Quarterly Report entitled "Risk Factors" and elsewhere herein. We do not undertake to update any of these forward-looking statements or to announce the results of any revisions to these forward-looking statements except as required by law.

We urge you to read this entire Quarterly Report on Form 10-Q, including the "Risk Factors" section, the financial statements, and related notes. As used in this Quarterly Report, unless the context otherwise requires, the words "we," "us," "our," "the Company," "Neuralstem" and "Registrant" refers to Neuralstem, Inc. and its subsidiaries. Also, any reference to "common shares," "common stock," or "shares" refers to our $.01 par value common stock. The information contained herein is current as of the date of this Quarterly Report (September 30, 2016), unless another date is specified. We prepare our interim financial statements in accordance with U.S. GAAP. Our financials and results of operations for the three- and nine-month periods ended September 30, 2016 are not necessarily indicative of our prospective financial condition and results of operations for the pending full fiscal year ending December 31, 2016. The interim financial statements presented in this Quarterly Report as well as other information relating to our Company contained in this Quarterly Report should be read in conjunction and together with the reports, statements and information filed by us with the United States Securities and Exchange Commission or SEC.

Our Management's Discussion and Analysis of Financial Condition and Results of Operations or MD&A, is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

Executive Overview - Discussion of our business and overall analysis of financial and other highlights affecting the Company in order to provide context for the remainder of MD&A.

Trends & Outlook - Discussion of what we view as the overall trends affecting our business and overall strategy.

Critical Accounting Policies- Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Results of Operations- Analysis of our financial results comparing the three-month and nine-month periods ended September 30, 2016 to the comparable period of 2015.

Liquidity and Capital Resources- An analysis of cash flows and discussion of our financial condition and future liquidity needs.

Executive Overview

We are focused on the research, development and commercialization of central nervous system therapies based on our proprietary human neural stem cells and small molecule compounds discovered from our stem cell-based screening platform. We are headquartered in Germantown, Maryland and have a wholly-owned subsidiary in China, Suzhou Neuralstem Biopharmaceutical Co. Ltd ("Neuralstem China").

Our technology base has produced three primary assets: Our NSI-189 small molecule program, our NSI-566 stem cell therapy program and our novel and proprietary new chemical entity screening platform. We have two product candidates in clinical development in a total of four indications.

In the cell therapy program, our patented technology enables the commercial-scale production of multiple types of central nervous system stem cells, which are under development for the potential treatment of various central nervous system diseases and conditions. Our lead product is the spinal cord-derived neural stem cell line, NSI-566, which is being tested for treatment of paralysis due to ALS, spinal cord injury and stroke. In addition, our ability to generate human neural stem cell lines provides a platform for screening and discovery of novel CNS-targeted compounds. This proprietary screening platform led to the discovery of our lead molecule, NSI-189, which is being tested for treatment of major depressive disorder.

We have developed and maintain what we believe is a strong portfolio of patents and patent applications that form the proprietary base for our research and development efforts. We own or exclusively license over 20 U.S. issued and pending patents and over 120 foreign issued and pending patents in the field of regenerative medicine, related to our stem cell technologies as well as our small molecule compounds.

We believe our technology base, in combination with our expertise, and collaborative projects with major research institutions, could facilitate the development and commercialization of products for use in the treatment of a wide array of central nervous system disorders including neurodegenerative and psychiatric conditions.

There can be no assurances that we will ultimately produce any viable products or processes or that our screening platform will lead to the discovery of any additional product candidates. Even if we are able to produce a commercially viable product, there are strong competitors in this field and our products may not be able to successfully compete against them.

All of our research efforts to date are at the pre-clinical or clinical stage of development. We are focused on leveraging our key assets, including our intellectual property, proprietary know-how, scientific team and facilities, to advance our technologies and clinical programs. In addition, we are pursuing strategic collaborations with members of academia and industry to further advance and discover additional product candidates.

Recent Clinical & Business Highlights

In May 2016, we enrolled the first subject in our NSI-189 Phase 2 clinical trial for the treatment of major depressive disorder (MDD).

In June 2016, we announced new NSI-189 preclinical data showing enhancement of mouse long term potentiation (LTP), an in vitro biomarker of memory by NSI-189 in a concentration-dependent and time-dependent manner. We believe that this study not only suggests the cognition enhancing potential of NSI-189, but also contributes toward the understanding of its mechanism of action.

In September 2016, we entered into a definitive agreement with Tianjin Pharmaceutical Holdings Co., Ltd. for a private placement of common stock and convertible preferred stock for gross proceeds of $20 million. This agreement is expected to close in the fourth quarter of 2016.

In September 2016, we achieved 50% enrollment in our Phase 2 clinical trial evaluating NSI-189 for the treatment of major depressive disorder (MDD).

In September 2016, we presented preclinical data which showed that NSI-189 was effective in the prevention and reversal of diabetic neuropathies in Type 1 and Type 2 diabetic mouse models.

In October 2016, we presented preclinical data which showed NSI-189's ability to ameliorate radiation-induced cognitive impairment and to protect hippocampal neurogenesis in a mouse model of brain injury due to radiation therapy of brain cancers.

Clinical Development Program Review

We have devoted substantially all of our efforts to the pre-clinical and clinical development of our small molecule compounds and our stem cell therapeutics. Below is a description of our most advanced clinical programs, their intended indications, current stages of development and our expected future development plans:

Clinical Pipeline:

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Pipeline Summary

NSI-189 Phase 2 randomized, placebo-controlled, double-blind clinical trial for the treatment of MDD

In May 2016, we enrolled the first subject in our NSI-189 Phase 2 clinical trial for the treatment of MDD. The Phase 2 trial will randomize 220 patients, in three cohorts (two active doses plus placebo), at 12 select trial sites, under the direction of study principal investigator (PI) Maurizio Fava, MD, Executive Vice Chair, Department of Psychiatry and Executive Director, Clinical Trials Network and Institute, Massachusetts General Hospital. In September 2016, we announced that we had achieved 50% enrollment in the study. We expect to release the results of this study in the second half of 2017.

NSI-566 Phase 1 and 2 safety trials for the treatment of Amyotrophic Lateral Sclerosis (ALS)

In September 2015, the Phase 2 interim data and the Phase 1 and Phase 2 combined interim data were presented at the American Neurological Association Annual Meeting by the principal investigator, Eva Feldman, MD, PhD, Director of the A. Alfred Taubman Medical Research Institute and Director of Research of the ALS Clinic at the University of Michigan Health. The data showed that the intraspinal transplantation of the cells was safe and well tolerated. Subjects from both the Phase 1 and Phase 2 continue to be monitored for long-term follow-up evaluations.

NSI-566 Phase 1 safety trial for the treatment of chronic Spinal Cord Injury

In January 2016, we reported on the interim status of the Phase 1 safety data on all four subjects with thoracic spinal cord injuries; the stem cell treatment demonstrated feasibility and safety. A self-reported ability to contract some muscles below the level of injury was confirmed via clinical and electrophysiological follow-up examinations in one of the four subjects treated. All subjects will be followed for five years. This study is being conducted with support from the University of California, San Diego (UCSD) School of Medicine.

NSI-566 Phase 1 safety trial for the treatment of motor deficits in stroke

In March, 2016, we completed dosing the third planned cohort, for a total of nine subjects, in a Phase 1 clinical trial evaluating safety at BaYi Brain Hospital in Beijing. Subjects are currently being monitored through their 24 month observational follow-up period.The trial is being conducted by Suzhou Neuralstem, a wholly owned subsidiary of Neuralstem in China.

Pre-Clinical Development Pipeline

We conduct investigational and discovery research on our proprietary neural stem cell lines, neurogenic small molecule screening platform, and neurogenic small molecule portfolio. We believe each of our three proprietary technologies are best in class. Our technologies enable us to identify unique neural stem cell lines for potential transplantation therapies and to utilize these stem cell lines to screen for novel new small molecule drugs. NSI-189 is a result of this screening technology, which we believe will be a significant treatment option for patients with depression or cognitive impairment.

Our preclinical research on NSI-189 is focused on elucidating its mechanism of action and investigating its potential utility as a broad neuroregenerative drug that promotes self-repair of various types of central and peripheral nerve degeneration. Recent preclinical data support this perspective on NSI-189 beyond the current indication of MDD. Supportive data include the finding that treatment of mouse brain slices with NSI-189 can cause within a few hours a dose-dependent enhancement of the magnitude of long term potentiation, a measure of synaptic plasticity and an in vitro biomarker of memory. Additionally, NSI-189 treatment of brain slices from mice with Angelman Syndrome-like genetic defect (which in humans leads to inherited mental retardation) restored LTP to normal levels. NSI-189 treatment of rats irradiated to induce brain injury that leads to cognitive impairment protected the brain to normal levels. These results suggest that the potential application of NSI-189 to treat diseases with cognitive impairment could be successful. Furthermore, NSI-189 was effective in the prevention and reversal of peripheral neuropathies due to diabetes in Type 1 or Type 2 diabetic mouse models, which suggest NSI-189's broad applicability toward treating both central and peripheral neuropathies arising from diverse etiologies. We believe that these data support our future outlook for NSI-189 beyond the ongoing Phase 2 clinical trial for the treatment of MDD and beyond even the potential treatment benefit of residual cognitive impairment in depressed patients.

Our Technologies

Stem Cells

Our technology enables the isolation and large-scale expansion of regionally specific, human neural stem cells from all areas of the developing human brain and spinal cord, thus enabling the generation of physiologically relevant human neurons of all types. We believe that our stem cell technology will assist the body in producing new cells to replace malfunctioning or dead cells as a way to treat disease and injury. Many significant and currently untreatable human diseases arise from the loss or malfunction of specific cell types in the body. Our focus is the development of effective methods to protect such cell types and in certain cases to generate replacement cells from neural stem cells. We believe that protecting the healthy cells or replacing damaged, malfunctioning or dead neural cells with fully functional ones may be a useful therapeutic strategy in treating many diseases and conditions of the central nervous system. We own or exclusively license over 10 U.S. issued and pending patents and over 70 foreign issued and pending patents related to our stem cell and related medical device technologies.

Small Molecule Compounds

The inhibition of adult hippocampal neurogenesis has been implicated in a number of diseases that affect cognition and/or emotion such as major depressive disorder. Utilizing our proprietary stem cell-based screening capability, we have developed and patented a series of small molecule compounds that stimulated neurogenesis in vitro. As part of our research, we focused on small molecule compounds that could enhance the baseline level of neurogenesis in normal healthy young mice in vivo.

Subsequent research indicated that some of the small molecule compounds could stimulate the neurogenesis of hippocampus as well as increase its volume. We believed that a compound that stimulates in vitro neurogenesis, enhances in vivo neurogenesis, increases hippocampal volume, and exerts anti-depressive effects on animals could be well-suited for treating major depressive disorder. During our preclinical research, we identified NSI-189 as the lead candidate that could stimulate all four activities. Pre-clinical testing of this compound at multiple doses showed antidepressant activity at 10, 30, and 100mg/kg doses with rapid bioavailability in the brain. Histology analysis of the mouse brains suggested a bell-shaped dose-response curve, 10mg/kg and 30mg/kg being optimal for pharmacologically active concentrations and with higher doses not necessarily yielding larger biological effects. Our collaborators at Massachusetts General Hospital have presented the human data from the Phase 1b MDD safety study which showed large effect size of clinical improvement in depressive and cognitive scales. This result was unexpected given the small size of the trial and may be indicative of the drug's promise as a therapeutic agent. We believe that NSI-189 stimulates neurogenesis and synaptogenesis in the human hippocampus.

Our portfolio of small molecule compounds which includes NSI-189 are covered by 10 U.S. exclusively owned issued and pending patents and over 60 exclusively owned foreign issued and pending patents related to our small molecule compounds.

Targeted Indications

Major Depressive Disorder (MDD)

NSI-189 is being developed for the treatment of major depressive disorder and other psychiatric and/or cognitive impairment indications associated with hippocampal atrophy. NSI-189 is the lead compound in our neurogenic small molecule drug platform. We believe that NSI-189 may provide an effective treatment for patients suffering from MDD by promoting neurogenesis and an underlying molecular pathway.

Major depressive disorder, or MDD (also known as recurrent depressive disorder, clinical depression, major depression, unipolar depression, or unipolar disorder), is a mental disorder characterized by episodes of all-encompassing low mood accompanied by low self-esteem and loss of interest or pleasure in normally enjoyable activities. MDD affects approximately 14.8 million American adults, or about 6.7 percent of the U.S. population age 18 and older in a given year. Additionally, there is a high failure rate with existing therapies. According to the STAR*D*study, 51% of subjects fail to respond to first-line therapy, 72% fail second-line therapy and 83% fail third line therapy. This creates a large unmet medical need and a significant market opportunity for alternative branded molecules such as NSI-189 for use as mono- or adjunct therapies that may replace or enhance current marketed therapies.

* Sequenced Treatment Alternatives to Relieve Depression (STAR*D) trial (Am J Psychiatry 2006; 163:1905-1917)

Amyotrophic Lateral Sclerosis (ALS)

Amyotrophic lateral sclerosis, or ALS, is a disease of the nerve cells in the brain and spinal cord that control voluntary muscle movement. ALS is an orphan condition in the U.S. and EU and approximately 6,400 people in the U.S. are diagnosed with the condition each year. The incidence of ALS is two per 100,000 people, and it is estimated that more than 20,000 Americans may be living with ALS at any given time. In ALS, nerve cells (neurons) waste away or die, and can no longer send messages to muscles. This eventually leads to muscle weakening, twitching, and an inability to move the arms, legs, and body. The condition slowly gets worse. When the muscles in the chest area stop working, it becomes hard or impossible to breathe. NSI-566 is under development as a potential treatment for ALS by providing cells designed to nurture and protect the patients' remaining motor neurons; and possibly repair some motor neurons which have not yet died but which are diseased. Neuralstem received orphan designation by the FDA for NSI-566 in ALS.

Chronic Spinal Cord Injury

A spinal cord injury, or SCI, generally refers to any injury to the spinal cord that is caused by trauma instead of disease although in some cases, it can be the result of diseases. It is estimated that there are 12,500 new cases of SCI per year and that at any given time, there are between 240,000 and 337,000 people in the United States that are living with SCI. Chronic spinal cord injury generally refers to the phase beginning 6 months after the initial injury. SCIs are most often traumatic, caused by lateral bending, dislocation, rotation, axial loading, and hyperflexion or hyperextension of the cord or cauda equina. Motor vehicle accidents are the most common cause of SCIs, while other causes include falls, work-related accidents, sports injuries, and penetrations such as stab or gunshot wounds. In certain instances, SCIs can also be of a non-traumatic origin, as in the case of cancer, infection, intervertebral disc disease, vertebral injury and spinal cord vascular disease. We believe that NSI-566 may provide an effective treatment for chronic spinal cord injury by "bridging the gap" in the spinal cord circuitry created in traumatic spinal cord injury and providing new cells to help transmit the signal from the brain to points at or below the point of injury.

Ischemic Stroke

Ischemic strokes, the most common type of stroke, occur as a result of an obstruction within a blood vessel supplying blood to the brain. Approximately 15 million people worldwide suffer stroke of which it is estimated that 87% of all strokes are ischemic strokes. Post-stroke motor deficits include paralysis in arms and legs and can be permanent. We believe that NSI-566 may provide an effective treatment for restoring motor deficits resulting from ischemic stroke by both creating new circuitry in the area of injury and through repairing and or nurturing diseased cells to improve function in patients.

Intellectual Property

Our research and development is supported by our intellectual property. We own or exclusively license over 20 U.S. issued and pending patents and over 120 foreign issued and pending patents in the field of regenerative medicine, related to our stem cell technologies as well as our small molecule compounds. Our issued patents have expiration dates ranging from 2016 through 2034, based on appropriate Patent Expansions. In our opinion the patents expiring in 2016 and in the near term are not critical to our business.

Operating Strategy

We generally employ an outsourcing strategy where we outsource our Good Laboratory Practices, or GLP, preclinical development activities and Good Manufacturing Practices, or GMP, Good Tissue Practices, or GTP, if applicable, and clinical development activities to contract research organizations or CROs and contract manufacturing organizations or CMOs as well as all non-critical corporate functions. Manufacturing is also outsourced to organizations with approved facilities and manufacturing practices. This outsource model allows us to better manage cash on hand and minimize non-vital expenditures. It also allows for us to operate with relatively fewer employees and lower fixed costs than that required by other companies conducting similar business.


As of September 30, 2016, we had 11 full-time employees. Of these full-time employees, 7 work on research and development and clinical operations and 4 work in administration. We also use the services of numerous outside consultants in business and scientific matters.

Our Corporate Information

We were incorporated in Delaware in 2001. Our principal executive offices are located at 20271 Goldenrod Lane, Germantown, Maryland 20876, and our telephone number is (301) 366-4841. Our website is located at

We have not incorporated by reference into this report the information in, or that can be accessed through, our website or social media channels, and you should not consider it to be a part of this report.

Trends & Outlook


We generated no revenues from the sale of our proposed therapies for any of the periods presented. We are mainly focused on successfully managing our current clinical trials related to our small molecule compounds and seeking potential partnerships for our stem cell product candidates. We are also pursuing pre-clinical studies on other central nervous system indications in preparation for potential future clinical trials.

During the nine months ended September 30, 2016 and 2015, we recognized approximately $8,000 of revenue in each period related to ongoing fees pursuant to certain licenses of our intellectual property to third parties.

On a long-term basis, we anticipate that our revenue will be derived primarily from licensing fees and sales of our small molecule compounds and licensing fees and royalties from our cell based therapies. Because we are at such an early stage in the clinical trials process, we are not yet able to accurately predict when we will have a product ready for commercialization, if ever.

Research and Development Expenses

Our research and development expenses consist primarily of clinical trial expenses, including payments to clinical trial sites that perform our clinical trials and clinical research organizations (CROs) that help us manage our clinical trials; manufacturing of small molecule drugs and stem cells for both human clinical trials and for pre-clinical studies and research; personnel costs for research and clinical personnel; and other costs including research supplies and facilities.

We focus on the development of treatment candidates with potential uses in multiple indications, and use employee and infrastructure resources across several projects. Accordingly, many of our costs are not attributable to a specifically identified product and we do not account for internal research and development costs on a project-by-project basis.

We expect that research and development expenses, which include expenses related to our ongoing clinical trials, will increase in the future, as funding allows and we proceed with our Phase 2 trial in major depressive disorder.

We have formed a wholly owned subsidiary in the People's Republic of China. We anticipate that this subsidiary will primarily: (i) conduct pre-clinical research with regard to proposed stem cells therapies, and (ii) oversee our approved future clinical trials in China, including the current trial to treat motor deficits due to ischemic stroke.

General and Administrative Expenses

General and administrative expenses are primarily comprised of salaries, benefits and other costs associated with our operations including, finance, human resources, information technology, public relations and costs associated with maintaining a public company listing, legal, audit and compliance fees, facilities and other external general and administrative services.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 2 of the Notes to Condensed Consolidated Financial Statements included elsewhere herein describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with U.S. GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe . . .

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